Maryland Chief Presses for Changes to Flood Program
Driven by complaints from victims of Hurricane Isabel, Maryland insurance officials have called for changes in the way the nation’s flood insurance program is run.
“We have seen first hand the loss of homes, cars, personal possessions and commercial properties,” Alfred W. Redmer Jr., insurance commissioner for the state, wrote in a report to Maryland’s congressional delegation. “And we have heard and shared the frustration of those whose attempts to rebuild their lives have been made even more challenging because of difficulties in dealing with their insurance companies—and with the National Flood Insurance Program.”
Redmer maintains that federal law limits states’ involvement with claims submitted by policyholders under NFIP’s Write Your Own (WYO) program. Steven Larsen, Redmer’s predecessor as commissioner, has criticized this stance and pressed for more state action on flood claims.
Despite Redmer’s position, the Maryland Insurance Administration (MIA) has been immersed in assisting with the more than 6,000 Isabel claims in the state. Redmer’s report said more than 70 MIA employees helped NFIP speed up the Isabel flood claims process to limit the number of complaints but that problems still arose.
Isabel caused damage to properties along the Chesapeake Bay in September 2003.
“While many of the issues raised by citizens centered on homeowners insurance questions, the vast majority of problems concerned the NFIP policies and coverage,” the report stated.
Based on the Isabel experience, Redmer offered suggestions for NFIP reforms.
“Maryland’s recent experience has shown that greater attention by both state and federal government needs to be shown to the flood insurance program—how it is marketed and sold, what training the sellers should have before being able to sell the product, what coverage should be provided by the policy, how the claims process is handled, and what recourse policyholders have if they are dissatisfied with the outcome.”
Officials must also address NFIP policy compliance in relation to mortgage loans, Redmer said. Since Congress has declared that everyone in a flood plain has to have flood insurance “it is not acceptable for there to be even one Isabel-damaged property that should have had flood insurance and did not” but he found there were many who were uninsured or underinsured.
The report cites instances of federal administrators allegedly mishandling cases. In one instance, the FEMA (Federal Emergency Management Authority) turned away people who had not called the toll-free number to obtain a registration number. “He would not let anyone use the telephone there,” the report claims. “This was particularly difficult for those who had no home to call from and no cell phone to use.”
At one claims site, a federal worker was not aware of a program to help people recover lost wages, four weeks after the storm, despite available literature on the program.
On the positive side, Redmer praised one federal manager for holding daily meetings for all staff to share information. He also noted that some representatives volunteered information on mold remediation, bringing it up even if a homeowner did not.
Other recommendations in Redmer’s report include:
• Require WYO insurers to audit policies for rating and classification accuracy.
• Review the policy that permits an insurer to delay settlement of a claim for contents pending resolution of a structure-related claim.
• Establish a time line for inspections.
• Require single not multiple adjusters to avoid consumer confusion.
• Require minimum education standards for producers and adjusters in the WYO program.
A U.S. Senate hearing on the NFIP was scheduled for March 11.